Union Cabinet Approves ECLGS 5.0 to Support MSMEs

The Union Cabinet approves ECLGS 5.0 to provide targeted credit support to MSMEs and airlines facing liquidity stress. The scheme is to the West Asia conflict and rising Air Turbine Fuel prices.

Emergency Credit Line Guarantee Scheme 5.0:

Dimension	Key Details
Nature	ECLGS is a government-backed initiative that provides collateral-free and low-cost credit to businesses facing economic shocks.
Aim	The scheme provides targeted liquidity support to MSMEs and airlines facing stress from the West Asia conflict and rising Air Turbine Fuel prices.
Launch	ECLGS has been launched in May 2020, and its 5th edition has been approved in May 2026.
Policy Linkage	The scheme has been introduced under the Aatmanirbhar Bharat Abhiyan package to address financial distress during COVID-19.
Nodal Agency	The Ministry of Finance is the nodal agency for the scheme.
Implementing Agency	The National Credit Guarantee Trustee Company Limited implements the scheme under the Department of Financial Services.
Eligibility	The scheme applies to existing borrowers with standard account status as of March 31, 2026.
MSME Credit Limit	MSMEs receive additional credit up to 20% of peak working capital utilised during Q4 FY 26, capped at ₹100 crore.
Airline Credit Limit	Airlines receive maximum loan support of ₹1,500 crore.
Funded Interest Term Loan	Airlines can convert up to 50% of unpaid interest into a funded interest term loan.
Government Guarantee	The scheme enables banks to offer credit without collateral or guarantee fees.
Guarantee Cover	NCGTC provides 100% guarantee cover for MSMEs and 90% guarantee cover for airlines.
Repayment Term	The repayment term is 5 years for MSMEs and 7 years for airlines.
Moratorium	The moratorium is 1 year for MSMEs and 2 years for airlines, with interest-only repayment during the moratorium period.
Interest Caps	Lending rates are capped at 9% for banks and 13% for NBFCs.
Validity	The scheme applies to all loans sanctioned by NCGTC from the issue date until March 31, 2027.
Financial Outlay	Total additional credit flow is ₹2,55,000 crore, with ₹5,000 crore specifically earmarked for airlines.
Aviation Allocation	The aviation sector allocation provides ₹1,000 crore loan per airline plus ₹500 crore on equivalent equity infusion.
Equivalent Equity Infusion	Equivalent equity infusion requires an airline to invest an equal amount of its own capital to receive additional loan support.
Significance	The scheme provides for operational stability, employment protection, lender confidence, and steady credit flow to high-risk sectors.